Norway has just 5.26 million people—roughly half the population of Los Angeles County—and only about 35% of LA’s vehicles on the road. But there is one area in which Norway outpaces even the most saturated EV market in America: per capita, Norway has more electric vehicle owners and drivers than anywhere else in the world.
But why?
While generous incentives, high taxes on gas and diesel vehicles, and rising fuel prices are part of the equation, there is more to it than that. Is it because Norway, with the second-longest coastline in the world, including famous fjords and 50,000 islands, is feeling the effects of rising sea levels? Or is it because the country sells every drop of oil it drills from the North Sea, making it far too expensive for locals to use? Or perhaps because, as a smaller nation with a dense population, Norway can efficiently provide a network of electric vehicle charging stations?
These factors contribute, but Norway has gone further than any other country in making electric vehicles (EVs) more accessible and affordable than their gasoline counterparts. Over time, this has made EVs not just desirable, but normal.
“Norwegians are not more environmentally conscious than other countries,” says Christina Bu, Secretary General of EV Norway, a nonprofit that represents EV owners. “The overwhelming majority of people buying EVs say the main reason is financial.”
Economist Lasse Fridstrøm, senior research economist at the Norwegian Centre for Transport Research, agrees. “Car electrification in Norway is driven not by generous subsidies, but, quite the opposite, by tight taxes,” he wrote in his report “Transforming the Car Fleet: Forecasts for Norway 2018–2050.”
Go electric, or pay higher taxes and tolls Norway doesn’t make electric vehicles cheaper; it makes gas and diesel cars more expensive than in other countries. Taxes on traditional vehicles create incentives for EVs, whether battery-powered or fuel cell-based. These zero-emission vehicles (ZEVs) are exempt from VAT (which is 25% on gas and diesel cars), registration taxes on used vehicles, annual ownership taxes, and fuel taxes. ZEVs also benefit from reduced tolls, discounted ferry fares, bus lane access, free public parking, and numerous free charging stations.
This policy, which has been in place since 1990 when the import tax on EVs was first abolished, has proven effective.
Taxes have long been a tool for guiding transportation policy in Norway, as Bu points out, dating back to the 1920s. “Until the end of the 1960s, cars were considered a luxury good that should be taxed heavily,” she says. “It had nothing to do with environmental concerns.”
People in Norway have adapted to this system, says Fridstrøm. “This is how people respond to taxes in capitalism around the world. If you make a product extremely expensive, fewer people will buy it. It’s basic economics.”
Take, for example, the difference between a Volkswagen Golf and a Volkswagen e-Golf. Here’s how their prices compare:
- VW Golf:
- Import price: $21,500
- CO2 tax: $3,750
- NOx tax: $260
- Weight tax: $2,500
- VAT: $7,000
- Total retail price: $35,000
- VW e-Golf:
- Import price: $30,590
- CO2 tax: $0
- NOx tax: $0
- Weight tax: $0
- VAT: $0
- Total retail price: $31,000
That’s just the initial price. Additional cost-of-ownership benefits make the EV even more affordable.
Norway calls this the “polluter pays” principle, and it’s been effective in encouraging EV adoption. While the country didn’t see widespread EV adoption immediately, the groundwork was laid over many years. In 2010, models like the Mitsubishi i-MiEV and Nissan Leaf started appearing on the roads, and EV adoption skyrocketed from there. In just five years, EV sales increased from 5.5% to 31.2% of total vehicle sales.
Despite this success, Norway’s goal of having 100% of new car sales be zero-emission vehicles by 2025 may be too ambitious. Fridstrøm estimates that 80% is achievable, but significant hurdles remain, such as the fact that 20-25% of Norwegians can’t park at home or charge their EVs easily.
Norway’s success story may be difficult to replicate in larger countries with more people and cars, like the US. “The US faces a bigger challenge because of its larger population and the number of vehicles on the road,” says Gennet Paauwe, communications advisor to Veloz, a nonprofit promoting EV adoption in California. “It also takes strong political support.”
Fridstrøm agrees: “If governments offer incentives, it has been proven to work. Something you could do is increase the gas tax, but I know this is politically unfeasible in the US.”
While Norway’s model has been successful, it may not be directly transferrable to other countries, especially in places where high taxes are less accepted. However, many European countries, including Norway, have higher tax revenue as a percentage of GDP, which helps fund social benefits like universal healthcare and education.
There is a deeper irony to Norway’s electric vehicle success. The country is also one of the world’s largest oil exporters, and its oil industry, including the state-owned Equinor, plays a critical role in its economy. Some environmentalists argue that Norway’s policies have only incentivized the continued extraction of fossil fuels, leading to a paradox where the country sells oil abroad while pushing EV adoption at home.
Norway’s electric vehicle policies won’t last forever, but for now, they have successfully made EVs more affordable and normalized them in daily life. As Bu points out, “What will we live off after oil?” The country will eventually have to transition away from its oil reliance, but for now, Norway’s EV policies are a model of how incentives and taxes can accelerate the shift to cleaner transportation.